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Sites for development and access to a public road – practical issues

In the course of planning a construction project, regardless of type, ensuring that the envisaged development has access to a public road is one of the basic issues without which the chances of obtaining a building permit dramatically decrease. Paradoxically, at the plot due diligence stage, from a legal point of view, the easiest situations are those where the road simply does not exist physically – then it is known in advance that the cost and schedule of the project have to allow for construction of road infrastructure.

In other cases, access to the road is often provided only in theory, because while access to the road might be provided in the physical sense (the road exists, is publicly accessible, passable, etc.), it is not provided in the formal legal sense – which prevents the investor from proceeding with the construction permit. On the other hand, there are cases where the road exists on the map, but in reality it does not meet the standards of a public road. Below we describe the most interesting cases we have encountered recently.

1. Loss of public road status

In one of the situations we examined, a warehouse property was located directly on a busy public road, but it was found that part of this road (running adjacent to the property in question and other properties) ceased to be a public road under a resolution of the municipal council. At the same time, this section was excluded from use by traffic. Interestingly, the road continued to be used normally, and thus the problem was impossible to detect “in the field.”

Consequently, despite the fact that the property had easy vehicle access – from a formal point of view, the property did not have access to a public road.

2. Use of a third party’s private infrastructure for vehicle access to a property

In another case, an existing exit from a public road to the property we analyzed was built half on the plot of the owner of the property, and half on the plot of a neighbor. As a result, the dotted line demarcating the lanes simultaneously constituted the boundary between neighboring properties. Mutual use of the road was not regulated in any way. Officially, therefore, each neighbor could move only along the narrow strip of road lying on their plot.

In this situation, a prospective buyer of the property would primarily be in a difficult situation if they planned to extend/do conversion work on an existing facility or planned to redevelop it completely. This is because the lack of access to a road of sufficient width would make it impossible to obtain a building permit. The solution would be to regulate the legal status by establishing the necessary easements. However, this would require an agreement between the neighbors or litigation – both paths of which could prove lengthy or costly in practice.

3. Access insufficient for the needs of the planned development

In practice, a property may have access to a public road, but only for the purpose of an existing structure. In other words, a new development will require additional construction of a new traffic connection or alterations to the existing one.

For example, a property in the Wielkopolska voivodeship had access to a public road through an existing exit, but the local zoning plan stipulated that all new developments in the area under analysis were to be connected via a road only delineated on the plan.

We encountered a slightly different case in a large urban center. In this case, while the local plan did not place restrictions on how the developments were to be connected, the local transportation department of the municipal authority did impose such restrictions. Officials informed us that the property in question had access to a public road solely for the purpose of the existing development – thus suggesting that the project schedule and budget should also include expenditures for the construction of a new road.

A similar situation occurred in the Śląskie voivodeship. Here, in turn, despite the existing road infrastructure, the local government authority expected the developer to perform further extensive construction – unnecessary from the point of view of the planned development , but important from the point of view of the municipality’s development plans for the area. The estimated cost of the required construction was so high that the project ceased to be profitable. As a result, the client abandoned the project.

4. Business consequences

If a property does not have access to a public road, this can have significant financial consequences. In the case of leased property, this could lead tenants to raise claims against the landlord. This is because it can be interpreted as a case in which the landlord does not ensure that the tenant can freely use the leased property. On the other hand, in the case of pre-let leases, first of all, there is a risk that the need to settle the issue of road access in advance will delay the construction of the facility, and thus it will not be possible to release the finished premises to the tenant on the agreed date. Tenants usually safeguard against this in the form of an option of withdrawal from the lease agreement or of charging contractual penalties for the delay.

In addition, if the buyer of the property ultimately intends to sell it to an institutional investor or use bank financing – they must expect to have to provide additional collateral, thereby increasing transaction costs. This collateral might take the form, for example, of the developer obtaining an appropriate insurance policy or presenting an appropriate corporate guarantee. In the case of a sale transaction, the buyer may also expect to retain a portion of the price until the issue of access to a public road is settled.

If settling this issue involves coming to an agreement with the local municipality and building part of the infrastructure – then, in addition, obligations under warranties and guarantees provided to the municipality in connection with the construction of the road will fall on the developer. In our experience, municipalities are reluctant to allow a developer to transfer these obligations to another entity (such as the road contractor or the purchaser of the property), which in turn prevents the developer from completely exiting the project after the sale.

When a property does not have access to a public road, this also adversely affects the process of obtaining a building permit – in such a situation, the competent county or city mayor may refuse to issue one. In fact, the need to build a new road may not only affect the budget; it will also significantly affect the project schedule. This is because in such a situation a road agreement often has to be negotiated with the road management authority as well which is usually a lengthy process. If, on top of this, the legal status of the land on which the road will be laid has to be regulated beforehand (e.g., through compulsory acquisition), the necessary time and costs involved could sink the project financially.